The article analyzes the optimal management of hydroelectric dams when natural water inflows follow predictable cycles. The Hotelling rule which determines the trajectory of the value of water in stock must apply cyclically, taking into account the seasonal breaks in water supplies and the needs to be satisfied. When a stock is built, if the capacity constraints of the reservoir are not binding, it is possible to make intertemporal arbitrations as in the management of a non-renewable resource. Then the value of water increases at the rate of interest. On the other hand, if the reservoir is empty or, on the contrary, if it is full, trade-offs are blocked and the Hotelling rule no longer applies. When the turbine capacity is saturated the value of the electricity produced is higher than that of the water which is used to produce it, despite a nil transformation cost.
- Q25: Water
- Q42: Alternative Energy Sources
- C61: Optimization Techniques • Programming Models • Dynamic Analysis
- L94: Electric Utilities
Claude Crampes, and Michel Moreaux, “Apports naturels en eau dans les barrages-réservoirs et règle de Hotelling”, TSE Working Paper, n. 18-962, November 2018.
Claude Crampes, and Michel Moreaux, “Valeur de l'eau et de l'électricité des barrages-réservoirs.Une version cyclique de la règle de Hotelling”, Revue Économique, vol. 72, n. 3, 2021, pp. 377–420.
Revue Économique, vol. 72, n. 3, 2021, pp. 377–420